Insurers and climate change

The Hartford Courant[2], ever vigilant to trends seen likely to affect the insurance industry, noted that 2011 is already the year with the most billion-dollar-plus weather-related disasters in US history. This year already has twelve [3]such incidents; the previous record-holder (2008) had only nine.

Which is not to say that 2011 is anywhere close to the year with the most expensive weather -- 2005's Hurricane Katrina cost almost three times as much in dollars (and far more than three times the number of lives) as this year's dire dozen combined. But remember the caveat that individual weather events don't constitute climate, only large-scale patterns in the weather determine the climate. Large-scale patterns like the number of extreme storms. Which number seems to be trending upward. Especially, if this year is any indication, the number of extreme tornadoes. Which just seem to have more energy (like heat) than they used to. And affect a larger area of the country than they used to. Who'd have thunk it?

Well, the insurance industry -- particularly, the property and casualty insurance industry -- is in charge of thinking it. P&C underwriters are professional experts, if not on the causes and mechanisms of climate change, at least on its hard-dollar effects. Weather-related losses have totaled some $52 billion this year. Assuming nothing more before 2012, that's still a billion dollars a week. Insurance companies can't just print money, and their investment portfolios probably aren't doing a whole lot better than yours and mine. So the money to pay the upward-trending level of property losses is going to have to come from premium dollars.

Net result: it's not just government actions, like raising taxes, that hit you and me in the pocketbook. It's also government inaction. Not that you'll see any realistic estimate of increasing climate-related property losses factored into any defense of the "we can't afford to address climate change" argument.

And, ironically, property losses, the insurance payments that result from them, and the insurance premiums that fund those payments all count as economic activity. They all contribute -- directly or indirectly, to GDP. Just another indication that we're measuring the wrong thing. Which contributes to the fact that we're getting more of it.